Post on 28-Dec-2015
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Objectives
• Explain why it is important to save
• Identify savings goals
• Identify savings options
• Determine which savings options will help you reach your savings goals
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Pay Yourself First
• What does it mean to “pay yourself first”?– Put some money in a
savings account before you buy things or pay bills
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Benefits of Paying Yourself First
• Learn to manage money better
• Save money toward identified goals
• Improve your standard of living
• Have money for emergencies
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Activity 1: Pay Yourself First Worksheet
Complete Activity 1 in your Participant Guide
– Write down your goals for the future
– Fill in the top half of the worksheet only
– Fill in the second half when the instructor directs you to
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How Your Money Can Grow
• Interest– Paid to you for keeping your money on
deposit with financial institutions – A percentage of the money in your account
• Compound interest– Money earned on the previously paid
interest and money already in your account
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Annual Percentage Yield (APY)
• The amount of interest you earn on a yearly basis
• Includes the effect of compounding
• Compare the APYs of the savings products, not the interest rates
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Rule of 72
• A formula that lets you estimate how long it will take for your savings to double in value
• 72 ÷ 4 = 18 years
• 72 ÷ 12 = 6%
• 72 ÷ 20 = 3.6%
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Savings Products
• Types:– Savings account– Money market deposit account– Certificate of deposit (CD)
• Choose savings products that are federally insured
• Calculate your insurance coverage:– Electronic Deposit Insurance Estimator (EDIE):
www.myfdicinsurance.gov
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Activity 2: Savings Products
Complete Activity 2 in your Participant Guide
– Determine which savings product would be best for each situation
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Non-Deposit Investment Products
• Investments:– Are long-term savings options purchased
for future income or financial benefit– Are NOT FDIC insured or bank
guaranteed, so you could lose all the money you invest
– May earn and grow more than a regular savings account because of the risk you take when you invest
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Types of Investment Products
• Stocks
• Bonds
• Mutual funds
• U.S. Treasury securities
• Retirement investments
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Stocks
• You:– Own a share/part of a company– May receive dividends if the
company profits
• The value of your investment changes (up or down) according to the stock market
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Bonds
• You lend money to a corporation or government entity for a certain period of time
• I Bonds– Purchased at face value
• EE Bonds– Normally purchased at half their face
value
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Mutual Funds
• A product that combines money from many investors to purchase numerous separate investments
• Diversify: spread your risk of loss across many savings and investment options
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U.S. Treasury Securities
– Treasury (T) bills– Treasury (T) notes– Treasury Inflation-Protected Securities
(TIPS)– Treasury (T) Bonds
• Minimum purchase price: $100.00
• Backed by the U.S. Government
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Retirement Investments
• Products to help you save toward retirement:
– Individual retirement arrangements (IRAs)
– 401(k) and 403(b) plans– Variable annuities
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IRAs
• May include a combination of investment products
• Are tax exempt
• Fluctuate with stock market
• Include Traditional IRAs and Roth IRAs
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401(k) and 403(b) Plans
• 401(k):– Established by an employer
• 403(b):– Offered to employees of public schools and
certain tax-exempt organizations
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Variable Annuities
• An insurance contract that invests your premium in various mutual fund-like investments
• Very costly– You should hold the annuity for at least 10
to 20 years to justify the fees
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Activity 4: Investment Products
Complete Activity 4 in your Participant Guide
– Match each investment product with the appropriate description
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Special Savings Programs
• Individual Development Account (IDA)– A matched savings account for job
training, education, business startup, or home down payment
• 529 College Savings Plan– An education savings plan operated by
a state or educational institution
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Other Investments
• Owning a home
Value of home = $250,000
Minus Debt = $200,000
Equity = $50,000
• Owning a business
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Activity 4: Pay Yourself First Action Plan
Complete Activity 4 in your Participant Guide
– Consider three decision factors when selecting the best savings and investment options
– Consider your financial goals and how you can save to reach them
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Module Summary
• What it means to pay yourself first and how you can benefit by doing it
• About a number of saving and investment options
• How to decide what savings and investment options are best for you
• How your money can grow with compound interest
• Tips to help you save more
Congratulations! You have learned: